Our latest monthly forecast is published today (free registration required). The most noteworthy change is a significant upgrade to US GDP growth in 2011, from 1.5% to 2.2%. This pushes our outlook for world growth next year up slightly, from 3.7% to 3.8%.
The extension of the Bush-era tax cuts and unemployment benefits will boost demand in the US by half a percentage point in 2011. However, growth will remain subdued compared with what is normal for this stage of a recovery, and short of the pace needed to reduce the stubbornly high unemployment rate.
Although the new stimulus is the result of a welcome outbreak of bipartisanship, it is only a bipartisan agreement on how to spend borrowed money. With a fiscal deficit estimated at 8.9% this year, the continued lack of clarity on bringing government finances back onto a sustainable path could, eventually, lead to global financial markets questioning the security of US Treasury bonds.
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December 17, 2010 at 10:30
DamnedLiberal
Wait until the Republicans, anxious to appease the far right, assume control of the House. Watch for massive cuts in social spending and cuts in assistance to states and municipalities.
Republicans will be quite happy to see the economy deteriorate further prior to the 2012 election–and it undoubtedly will.
The only question:
http://WhoShouldReplaceObama.com
December 19, 2010 at 20:21
Shaun Peterson
I am always reminded by fellow Economist contributor Matt Ridley and a quote from his book “The Rational Optimist”:
“That which cannot go on forever…will not.”
Either way it will get worked out. The question is how painful and whom ultimately will have the most pain inflicted upon them. I don’t want to speculate, so I won’t. But, it’s always good to prepare for the worst and hope for the best.